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2015 (6) TMI 757 - ITAT MUMBAI

2015 (6) TMI 757 - ITAT MUMBAI - TMI - Income received towards amenities - 'income from other sources' or 'income from house property' - Held that:- On going through the amenities agreement, the only amenity to be provided by the lessor to the lessee was in respect of structural repairs to the building let out and to pay municipal and property taxes in respect of the let out property. We fail to understand how these can be termed as amenities in respect of the letting out property. Even if the p .....

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rror in treating the amenity charges under the head 'income from other sources'. - Decided against assessee.

Addition on rent received - difference in TDS certificate and computation of total income - Held that:- We do not agree with this claim of the assessee as the method of accounting is only in respect of profits and gains of business or profession or income from other sources. The reconciliation statement filed before us is also not convincing as the assessee is required to compu .....

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of capital expenditure lead out of expanded wholly and exclusively for the purpose of making or earning income which is taxed under the head 'income from other sources'. In our considered opinion, payment of municipal taxes cannot be said to be let out or expanded wholly and exclusively for the purpose of earning amenity charges, as these municipal taxes are directly related to the letting out of the property, the rental income from which is taxed is under the head 'income from house property'. .....

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e documentary evidences brought on record before us and referred to. In our considered opinion, there appears to be conflict in these documentary evidences, therefore, in the interest of justice, we restore this issue to the file of the A.O. The A.O. is directed to verify whether the Cinema Theatre was fit for use after considering the report from the office of Commissioner of Police, Mumbai as brought on record by the ld. AR. The A.O. is directed to decide the issue afresh after giving reasonab .....

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d together and are disposed of by this common order for the sake of convenience. ITA No. 7497/Mum/2012 (Assessee's appeal) 2. The first grievance of the assessee is that the ld. CIT(A) erred in confirming the action of the Assessing Officer (A.O.) of treating the income received in respect of the amenities under the head 'income from other sources' instead of 'income from house property' as claimed by the assessee. The facts of the case are that the assessee is a partnership .....

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as entered into two different agreements with HSBC Bank for the lease rental and amenities charges. On further going through the amenities agreement, the A.O. found that the only amenity to be provided was in respect of repairs and maintenance of the property and payments of municipal taxes. The A.O. also noticed that the assessee has shown entire amenities charges under the head 'income from house property'. 3. The assessee was asked to explain why amenities charges should not be treate .....

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ties. In support of his contention, the counsel relied upon the decision of the Hon'ble Supreme Court in the case of Shambhu Investment (P) Ltd. vs. CIT 263 ITR 143 (SC), the Hon'ble Bombay High Court in the case of CIT vs. J. K. Investors (Bom.) Ltd. [2012] 211 Taxmann 383 (Bom) and Hyderabad Tribunal (in ITA Nos. 1013 and 1014/Hyd/2013). 5. Per contra, the ld. DR strongly supported the orders of the Revenue authorities. After giving a thoughtful consideration to the rival submissions, .....

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ct of the letting out property. Even if the property is not let out, the assessee has to incur expenditure towards repairs and maintenance of the said property and also to pay municipal taxes. It appears that by separately charging in the guise of amenities charges, the assessee wanted to reduce the liability to property tax which is based on the rental income of the property. The cases relied upon by the ld. Counsel are totally misplaced and not matching the facts of the case in hand. Consideri .....

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es should be treated as advance. 7. We do not subscribe to this claim of the ld. Counsel. The amenity charges have been received by the assessee as per the agreement and the same has to be taxed under the head 'income from other sources' as held hereinabove. The alternate claim of the assessee is accordingly dismissed. 8. Ground no. 3 relates to the addition of ₹ 4,00,697/-. Facts relating to this grievance show that on verification of the TDS certificate, the A.O. found that the a .....

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wing the cash system of accounting and, therefore, has booked only that much of rent which it has received. We do not agree with this claim of the assessee as the method of accounting is only in respect of profits and gains of business or profession or income from other sources. The reconciliation statement filed before us is also not convincing as the assessee is required to compute the income as per the provisions of the law. The undisputed fact is that the assessee has received rent of ₹ .....

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turn of income noticed that the assessee has claimed municipal taxes of ₹ 12,36,51,131/- along with other expenses as claimed against business income which the assessee has shown as ₹ 1,20,000/- received from running cinema theatre. The A.O. found that the receipt of ₹ 1,20,000/- as income from running cinema theatre is nothing but an amount received from HSBC Bank just to show that the premises of theatre property was used for business. The A.O. treated ₹ 1,20,000/- as & .....

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ggrieved by this the Revenue is before us. 12. The ld. DR strongly submitted that the payment of municipal taxes have nothing to do with the amenities charges received by the assessee as per the agreement. Therefore, there is no nexus in incurring such expenditure for earning of the income. Accordingly, the assessee reiterated what has been submitted before the ld. CIT(A). 13. We have given a thoughtful consideration to the rival submission and have carefully perused the orders of the authoritie .....

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exclusively for the purpose of earning amenity charges, as these municipal taxes are directly related to the letting out of the property, the rental income from which is taxed is under the head 'income from house property'. We, therefore, find that the finding of the ld. CIT(A), in allowing the municipal taxes deductable as erroneous. We set aside the findings of the ld.CIT(A) and confirm that of the A.O. Ground Nos. 1 and 2 are accordingly allowed. 14. Ground No. 3 relates to the griev .....

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lly asked to explain why these expenditures should be allowed when it has not done any business in respect of cinema theatre. The assessee strongly contended that its cinema building was ready to use and was in fact put to use for conducting meetings/conferences by HSBC Bank from which it has received ₹ 1,20,000/- and, therefore, the expenditure should be allowed. The A.O. did not accept this contention of the assessee and disallowed the entire claim of expenditure. 15. The assessee carrie .....

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ssee in respect of Cinema Theatre. The ld. CIT(A) was convinced that the cinema construction was completed and all requisite permission were received for using the same for exhibition of the films during the year itself. The ld. CIT(A) was of the opinion that once the business was set up, the related expenditure are allowable. However, the ld. CIT(A) restricted the claim of expenditure at ₹ 1,86,47,691/- and directed the balance to be treated as capital expenditure. The ld. CIT(A) further .....

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